Cost of troubled power plant rises

EDWARDSPORT, Ind. (AP) - Duke Energy said it is pumping another $174 million into a coal gasification plant it's building in southwestern Indiana that has been plagued by cost overruns.

The company said Wednesday in two public filings that the money will go toward fixing numerous technical problems found at its plant in Edwardsport, which is about 60 miles north of Evansville. It said the work will delay the plant's in-service date by about three months, to May 29, 2013.

The project's additional costs will raise the project's total price to $3.55 billion, including financing costs. Duke said it will absorb the additional construction costs and that they won't be passed on to its ratepayers.

The Indianapolis Star reported (http://indy.st/SmF558 ) Wednesday that excluding the project's financing charges of $400 million, Duke said the new estimated cost of the plant is $3.154 billion. That's about double the original estimate of $1.6 billion.

When completed, the 630-megawatt plant will be one of the world's largest coal-gasification plants. It will convert coal into a synthetic gas that will be burned in a traditional turbine power plant to generate electricity.

Among the engineering problems Duke reported were leaks in six crucial oxygen system valves and malfunctioning equipment and "control system logic errors" that required realignment of the plant's steam turbine and other work, resulting in a nearly six-week delay.

Duke spokeswoman Angeline Protogere said none of the plant's technical issues were to a "show-stopper." She said they reflect a complex construction process involving elaborate testing and adjustments.

Protogere said the plant has seen several milestones in recent weeks, including synthetic gas production from coal last week and production of electricity from that gas this week.

"These are critical milestones," she wrote in an email. "We've also operated both the combustion and steam turbines on natural gas and have been putting natural-gas fired power onto the grid for more than six months."

The Edwardsport plant has drawn strong criticism for numerous cost increases over the past four years. It has also been the focus of an ethical storm for Duke Energy after company officials and regulators were found to be discussing the cost overruns in secret meetings, prompting several firings and resignations.

The former chairman of the Indiana Utility Regulatory Commission, David Lott Hardy, was fired and is now awaiting trial on four felony counts of misusing his office.

The IURC is considering a proposed settlement agreement on the plant's cost to determine who will pick up the plant's higher costs. Under the proposal, ratepayers will foot about $2.595 million of the plant's costs and Duke will pay for the rest, including any price increases.

The company said in a filing with the Securities and Exchange Commission that it expects to record a pretax charge to earnings of $180 million in the third quarter.